Over the last month the Bitcoin price has climbed substantially but in truth the price has been climbing steadily upward since March.
In the last three months the price of Bitcoin has increased 187 percent and in the last month alone the price climbed 42 percent since May.
But what is behind this rally? Luno’s general manager for Africa, Marius Reitz says that this price increase is in line a long-term trend.
“The prices of Bitcoin and Ethereum have risen significantly since the end of March and there was another rally this weekend. Luno is more interested though, in the long-term potential of Bitcoin forming the backbone of a new international financial system which will see long term interest in the asset,” says Reitz.
The manager believes that there are six reasons the cryptocurrency is climbing in value.
The ever changing game
The first of those reasons is Facebook’s Libra which was revealed just last week.
Luno believes that Libra is a game-changer for not just cryptocurrency but the global financial system as well. The reason for this is that, unlike something like Bitcoin, Libra is backed by currencies or financial systems folks already know well. Add to this a more balanced issuing system and you have a currency that’s primed to be more stable.
In addition to this, Facebook’s reach has the potential to bring more folks into the cryptocurrency fold.
The next reason for the rally cited is something that happened a few months ago:
“In April, there was large buyer or group of buyers that invested a substantial amount in the market which may have signalled a buy trigger and the current run may still be in response to the momentum of that initial price increase. Many investors were sitting on the side-lines waiting for the right moment to enter the market,” explains Luno.
Luno points to the trade war between China and America as yet another reason the currency is climbing in value. The exchange says that, due to Bitcoin not leaning on existing stocks, cash or other commodities, it presents something of a tempting safe-haven for investors who are looking for alternative investments.
The next reason is bullish signals. Over the last few months banks and tech firms have begun entering the cryptocurrency sector. This has led to better scaling capacity, new solutions such as stablecoins and more.
The penultimate reason given for the rally by Luno builds off of the previous reason – institutional interest. Firms such as Fidelity Investments recently announced it is building a cryptocurrency solution for investors who invest money from pension or hedge funds.
“Institutional investors have not been able to trade successfully in the crypto market. Yet many also view Bitcoin as an alternative asset class and want to invest a small percentage of their cash. Fidelity’s infrastructure could facilitate millions and even billions of dollars of investment into the market,” says Luno.
The art of speculation
Finally, Luno says that one of the reasons driving the price up is speculation. Given the price rally, a number of investors don’t want to miss out on the price increase, for good reason. As mentioned earlier, this increase is in-line with an upward trend expected for the currency and this is likely to have driven interest in investing.
“At the moment any buying of Bitcoin tends to lead to a period of speculation, which is the ongoing theme for the currency, so we expect more volatility to follow, as we have seen with many similar waves over the past few years,” says Reitz.
The GM goes on to say that because of this speculation, Luno has continously tried to educate investors about the dynamics of the market.
So should you invest in Bitcoin? To answer this we’re going to quote Reitz because his advice is worded excellently.
“We encourage responsible investing which includes never investing in something you don’t understand, and never spending more on a speculative technology like bitcoin than you can afford to lose,” the GM says.
So there you have it, if you wanted to know why Bitcoin is suddenly worth R161 950 a coin, these reasons might help explain that.
[Image – CC 0 Pixabay]